June 18, 2025 | Banking Sector Update | Analyst Ratings, Stock Performance, Institutional Confidence
Shares of IndusInd Bank surged 3.5% on June 18 after Nomura upgraded the private sector lender to a “buy” rating and significantly revised its target price to ₹1,050 from the earlier ₹700. This implies a strong upside potential of 25% from current trading levels. The upgrade comes at a time when the stock is recovering from a prolonged phase of underperformance marked by governance-related headwinds and valuation concerns. The rally in IndusInd’s share price signals investor optimism around structural changes within the bank, as well as renewed institutional confidence following Nomura’s assessment of its capital strength, asset quality repair, and leadership restructuring roadmap.
Highlights
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Nomura raised IndusInd Bank’s target price to ₹1,050 from ₹700.
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Stock gained 3.5% to ₹838 per share during June 18 trade.
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Brokerage sees 25% upside driven by governance reset and valuation appeal.
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Stock has rebounded 7% in the last month after falling 13% YTD.
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Analysts Cite Legacy Issue Resolution and Strong Capital Buffers as Upgrade Catalysts
According to Nomura’s research note, the bank has successfully addressed many of its historical challenges, including governance concerns and loan book vulnerabilities that had weighed on investor sentiment in previous quarters. Analysts highlighted a rigorous balance sheet clean-up involving one-time provisions and improved underwriting discipline. This, combined with IndusInd’s high Common Equity Tier-1 (CET-1) capital ratio of 15.1% and a liquidity coverage ratio (LCR) of 118%, reinforces the bank’s ability to manage credit stress while pursuing growth. Nomura believes the lender is now positioned for a profitability rebound, driven by cleaner books, improved governance visibility, and capital adequacy metrics well above regulatory thresholds.
Highlights
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CET-1 ratio at 15.1% and LCR at 118% indicate strong capital base.
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Loan book clean-up with one-time provisions addressed legacy NPAs.
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Analysts see room for RoA to rise to 1% by FY27.
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Bank’s ability to manage future credit cycles seen as significantly enhanced.
Leadership Change Expected in FY26, Setting Stage for Strategic Repositioning
Nomura underscored that a key driver of its bullish stance is the planned leadership transition expected in FY26. While no formal names have been disclosed, the board has reportedly been working toward appointing a new top executive with a mandate to reset the bank’s strategic direction. This is viewed as a pivotal governance move, akin to leadership shifts at RBL Bank in 2021 and Yes Bank in 2018—both of which led to long-term recovery after periods of investor mistrust. The expectation is that the incoming leadership at IndusInd will focus on risk-adjusted growth, institutional transparency, and a tighter corporate governance framework that can anchor sustainable earnings over the next three years.
Highlights
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Leadership change is planned for FY26 to guide a fresh strategic course.
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Nomura draws parallels to RBL (2021) and Yes Bank (2018) turnarounds.
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Analysts expect improved governance to boost investor confidence.
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Board seen as committed to a “directional reset” of growth and risk norms.
Valuation Appeal Boosted by Low Price-to-Book, Revised EPS Outlook
One of the most compelling aspects of Nomura’s call is the bank’s valuation relative to peers. IndusInd is currently trading at just 0.9x its one-year forward book value per share (BVPS), well below the sector average. Given this valuation gap, combined with improving fundamentals, Nomura revised its earnings per share (EPS) estimates for FY27 and FY28 upward by 14–16%. Better net interest income (NII) projections and sharply reduced credit cost estimates have led the brokerage to forecast return on equity (RoE) in the range of 7–10% and return on assets (RoA) between 0.8–1.1% over the FY26–FY28 horizon. Such metrics, if achieved, could re-rate the stock meaningfully from current levels.
Highlights
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Stock trades at 0.9x 1Y forward book—attractive compared to peers.
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Nomura revised FY27–FY28 EPS estimates up by 14–16%.
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Improved NII and lower credit costs drive profitability forecast.
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RoA seen at 0.8–1.1%, RoE forecast between 7–10% over FY26–28.
Promoter Stake Hike, Regulatory Comfort Add to Investor Optimism
The brokerage also cited regulatory signals as positive sentiment drivers. The Reserve Bank of India (RBI), in its recent communication, acknowledged the bank’s asset recovery and governance efforts, creating a sense of regulatory assurance around its future stability. Additionally, there is speculation around a potential RBI nod for a promoter stake hike, which could significantly reduce investor concerns regarding ownership uncertainty. Such a move would align with the central bank’s broader framework on ownership neutrality and long-term institutional control. Market participants are pricing in the likelihood that these regulatory alignments will result in reduced volatility and a more predictable risk-reward profile for investors.
Highlights
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RBI acknowledged IndusInd’s recovery efforts in recent interactions.
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Potential promoter stake hike could improve ownership clarity.
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Regulatory comfort expected to reduce stock volatility.
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Analysts see enhanced institutional trust in long-term governance roadmap.
Retail Franchise Strength and NII Outlook Support Medium-Term Rebound
Beyond governance reforms and balance sheet repair, Nomura emphasized the resilience of IndusInd Bank’s retail franchise as a core driver of sustainable performance. The bank’s well-diversified loan portfolio, especially in vehicle finance, microfinance, and small business segments, positions it to capture medium-term credit demand as the Indian economy continues to expand. Net interest income (NII), which has remained stable despite past challenges, is now expected to grow at a faster pace. The brokerage estimates that this retail-led recovery will help IndusInd outpace peers in terms of profitability rebound by FY27, particularly if supported by moderating credit costs and steady CASA growth.
Highlights
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Strong retail base supports consistent loan growth across segments.
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NII expected to rise faster amid improving demand and stable spreads.
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Vehicle finance and small business lending remain key growth pillars.
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Retail-driven model seen as catalyst for FY27 profitability rebound.
